Help needed in vetting investment plantation property in Brazil

16 Replies

In addition to the bigger pockets webcast, I also frequently listen to the real estate radio guys podcast to further enhance my education. They had a show recently with a speaker from an investment firm offering opportunities to buy sections of cashflow producing agricultural land in Brazil. The arguments were made for investing in agricultural real estate, and Brazil in particular. I spoke to the company managers, and they are going to put me in touch with some of their current investors who have visited the plantation. I'm looking for some advice in terms of how to vet an foreign investment. Their proforma shows a IRR of 18% per anum over 20years. However, year 0 - 6 has 0% return, and then it escelates from their and from year 8 to year 20 the returns are in excess of 40% cash on cash per annum. I'd be happy to email the proforma's to anyone that may be able to help me vet this opportunity. Thanks.

That sounds extremely sketch. Unless you deeply understand the business and the risk factors, I would pass on this.

I asked a colleague, who's native Brazilian as well as a realtor here in the US, for her general opinion. She splits her time these days between the US and Brazil. Here is her response:

Without reading the fine print, my overall impression is that this is like everything else in Brazil. Someone has good intentions but it will stay as just that "good intentions" and it won't produce the "grandiose" returns on investment as expected.
What seems to be the best investment in Brazil right now appears to be Real Estate. But even with that I'd be very cautious. Although the crude oil exploration has leveled off a little lately that still is a good investment.
Sorry for not being more excited about this. I guess I've been living here too long and seen too many great possibilities run bad or at least not having had the positive outcome expected.

Originally posted by @Fred Stevenson:

In addition to the bigger pockets webcast, I also frequently listen to the real estate radio guys podcast to further enhance my education. They had a show recently with a speaker from an investment firm offering opportunities to buy sections of cashflow producing agricultural land in Brazil. The arguments were made for investing in agricultural real estate, and Brazil in particular. I spoke to the company managers, and they are going to put me in touch with some of their current investors who have visited the plantation. I'm looking for some advice in terms of how to vet an foreign investment. Their proforma shows a IRR of 18% per anum over 20years. However, year 0 - 6 has 0% return, and then it escelates from their and from year 8 to year 20 the returns are in excess of 40% cash on cash per annum. I'd be happy to email the proforma's to anyone that may be able to help me vet this opportunity. Thanks.

I hold farmland in Uruguay.  Originally I looked into Brasil but found it way too expensive and complicated to do.  You have to register money on the way in, or possibly never get it out.  Employment laws are very complex as well, and in the end you become 100% dependent on your operator -- if it goes sideways at any time you're totally screwed.

If you have 'serious' money (3-4mil plus) to invest I can hook you up with a real experienced US guy running 25k+ hectares (about 60k acres) of soybeans in Brasil.  He'll do you right, but entry is expensive.

If you want to start smaller in Uruguay with land you own in a country that is far less complex, and a manager who is small enough to look out for you let me know.  I have had good success there, though current crop prices say the coming year will be quite lean.

@Fred Stevenson  

 for 18% return I fail to see the risk reward component here.. you could get wiped out.

And I for one make far more than 18% per annum right here in the US with much more security.  although one day I hope to visit South America.. I would like to take one of the cruises up the amazon

Fred,

Part of the reason for the slow payoff is that they will be planting something that takes time to harvest.  Have you ever been to Brazil?  I think you could find far safer deals here in the US.  I see deals every day that have 10%+ cash on cash.  Why would you go to a country where it would be easy to rip you off.

Mark

Google Kory Melby.  He should be able to help you with your due diligence.  Keep us posted

I have spent considerable time in Brazil and without knowing the specifics about your investment can only generalize but I would agree with James. Brazilians have a lot of good intentions but the execution is often lacking. And Brazil has also just fallen into recession too.

Also, what is the money raised going to be used for and what is the "agricultural land" going to grow or is it just land banking for the future. Land is often a good investment, especially agricultural land, but where is the return coming from.

You may not realize it but Brazil was a military dictatorship just a few decades ago and its current democratic form is still evolving. Corruption is rampant and usually regarded as just the way things are so buyer beware. Why do you think wealthy Brazilians are putting all of their money into Miami real estate?

hi fred, 

I'm originally from Brazil. There are many options for u to invest in the agricultural field. But you should go down there and study a little bit about what u want to put or money in.

I could suggest soy, corn, sugar cane. Another option would be cattle or eucalyptus tree.

My wife's family has the land and give concession to some farmers and make a portion of the profits out of the crop when they harvest.

As u see, there r options, u can double your money or lose it all.

Go visit first

hi fred, 

I'm originally from Brazil. There are many options for u to invest in the agricultural field. But you should go down there and study a little bit about what u want to put or money in.

I could suggest soy, corn, sugar cane. Another option would be cattle or eucalyptus tree.

My wife's family has the land and give concession to some farmers and make a portion of the profits out of the crop when they harvest.

As u see, there r options, u can double your money or lose it all.

Go visit first

Thanks for everyone's feedback.  I actually did go visit, and I was very impressed with the operation, the science, and the management team.  It's a long term play with 40% cash on cash returns starting around year 6.  It will take this while for the returns to hit this mark due to the time for the land to start producing the crop.  This particular investment is in hybrid coconuts and neem trees for those that are curious.  Both crops have multiple use end products with great future demand. 

Hi Fred, How is it going this investment ?  Did you decide to invest at that time ?

Hi Fred, How is it going this investment ?  Did you decide to invest at that time ?

so far everything is going according to schedule. I did invest 

Got to be the RAY LUCIA show.     I guess they keep promoting COCONUTTS because there are foolish people willing to believe.

You get the deed and everything and all will be handled for you.  Come on.  Coconutts never stop growing and many uses for Coconutts.................hahahaha.

If you were there and did it yourself ...ok.

You be providing a job for Luis, Migel, Jose and all that is part of the sell.

Ray has been punished before for non-sense.    This could be another time.

This is one of those cases where one has to ask oneself if its such a good deal why are they offering it you?

Ive been scammed once in my life from Ebay.  The seller was from Brazil, so you know how I feel about this "opportunity" for you. Buyer be very aware…I would move VERY cautiously if at all…to me, there is greater opportunities in your own community or within a 2 hour radius.  

Originally posted by @Fred Stevenson :

In addition to the bigger pockets webcast, I also frequently listen to the real estate radio guys podcast to further enhance my education. They had a show recently with a speaker from an investment firm offering opportunities to buy sections of cashflow producing agricultural land in Brazil. The arguments were made for investing in agricultural real estate, and Brazil in particular. I spoke to the company managers, and they are going to put me in touch with some of their current investors who have visited the plantation. I'm looking for some advice in terms of how to vet an foreign investment. Their proforma shows a IRR of 18% per anum over 20years. However, year 0 - 6 has 0% return, and then it escelates from their and from year 8 to year 20 the returns are in excess of 40% cash on cash per annum. I'd be happy to email the proforma's to anyone that may be able to help me vet this opportunity. Thanks.

A section is about 640 acres so when you say you are buying 'sections' land just how many acres are we referencing here and what sort of money is involved? There need to be some information regarding the exact nature of the investment. Is there a name of the company and something that does describe particulars?